In the Courts

Water Cases

Aqua Tex., Inc. v. Hays Trinity Groundwater Conservation Dist., No. 1:23-CV-1576-DAE, 2024 U.S. Dist. LEXIS 172442 (W.D. Tex. 2024).

Aqua Texas, a Texas retail public utility, alleged that on April 13, 2023, the Hays Trinity Groundwater Conservation District (“Hays Trinity”) sent Aqua Texas a Notice of Alleged Violation (“NOV”) for exceeding its permitted production limit for the 2022 year. Specifically, the NOV alleged that three of Aqua Texas’s operating wells had exceeded the annual drought-adjusted permit allotments. Based on this violation, Hays Trinity ordered Aqua Texas to pay $448,710 in penalties.

Aqua Texas further alleged that NOVs were issued to several other water providers who over-pumped during drought conditions, but Hays Trinity engaged in settlement negotiations with four providers, resulting in the forgiveness of penalty payments in exchange for the water providers’ commitment to expend funds on conservation efforts. Aqua Texas approached Hays Trinity with a request for the same forgiveness based on what Aqua Texas asserted is millions of dollars spent to reduce water loss and address leakage caused by aging infrastructure in its own systems. Aqua Texas contended that Hays Trinity denied its request and threatened to not renew Aqua Texas’s permits if the penalty was not paid. Aqua Texas also alleged that Hays Trinity disparaged Aqua Texas in the media and has repeatedly shown “unequal treatment and unlawful bias” against Aqua Texas.

On December 29, 2023, Aqua Texas filed suit in the United States District Court for the Western District of Texas alleging among other procedural claims: (1) a violation of equal protection based on Hays Trinity’s refusal to forgive Aqua Texas’s penalties despite Hays Trinity’s “establishment of a policy and practice of granting penalty forgiveness to other similarly situated water utilities” for money spent on conservation efforts; and (2) a regulatory taking of Aqua Texas’s vested right to drill for and produce groundwater located beneath its real property based on Hays Trinity’s issued permit moratorium on new wells. Hays Trinity filed a motion to dismiss, and in this case the district court determined whether to allow the claims to proceed.

Regarding the equal protection claim, the Court found that Aqua Texas sufficiently alleged a class-of-one equal protection claim against Hays Trinity. Hays Trinity asserted that there is no right to settlement created by any of its rules or policies. In response Aqua Texas alleged that its claim was not based on a right to settlement, but rather Hays Trinity’s established policy and practice of penalty forgiveness for conservation efforts. Aqua Texas specifically pointed to Wimberley Water Supply Corporation, who was assessed $140,620 in penalties but was then allowed to forgo penalty payment based on $90,000 spent on conservation efforts. Aqua Texas states that the Hays Trinity Board of Directors (“Board”) determined then that it would forgive the penalty if a water service provider spent money to fix leaks or prevent water loss, thus setting a precedent and policy for how the Board would handle penalty forgiveness. The Court found that Aqua Texas successfully alleged that it was intentionally treated differently from other similarly situated water providers and there was no rational basis for the difference in treatment. The Court allowed the equal protection claim to proceed.

Regarding the takings claim, the Court found that Aqua Texas alleged a regulatory takings claim sufficient to survive dismissal. The Court looked to (1) the economic impact of the permit moratorium; (2) the extent to which the moratorium interfered with investment-based expectations; and (3) the character of the government action involved. The Court used a previous Fifth Circuit opinion which held that denial of permits can “undoubtedly” reduce the value of a property to find that Aqua Texas suffered an economic impact on the first issue. The Court considered money spent by Aqua Texas to purchase property and drill wells with the expectation of pumping groundwater and found that Aqua Texas sufficiently alleged interference with investment-backed expectation as to the second issue. Lastly, the Court acknowledged that the State is empowered to regulate groundwater production, but government actions that may be characterized as acquisitions of natural resources have often been held to be a taking. However, the Court noted that this factor would likely weigh in favor of Hays Trinity at a later stage of the case.

Though the Court did not get to the merits of either claim, the Court’s finding that Aqua Texas alleged sufficient facts to allow the claims to proceed is notable. Going forward, water districts may be cautious in how they address penalties and issue moratoriums, particularly as drought conditions continue.

Dobbin Plantersville Water Supply Corp. v. Lake, 108 F.4th 320 (5th Cir. 2024).

Dobbin Plantersville (“Dobbin”) is a nonprofit water supply corporation created under Chapter 67 of the Texas Water Code. Dobbin holds a water Certificate of Convenience and Necessity (“CCN”), which grants it the exclusive right to provide retail water service within its CCN area in Montgomery and Grimes Counties. In 1997, Dobbin took out two 40-year loans from the United States Department of Agriculture (“USDA”) through the USDA’s lending program, which are still outstanding. At the time, Dobbin’s CCN area was primarily rural or semi-rural.

SIG Magnolia L.P. (“SIG”) and Redbird Development L.L.C. (“Redbird”) (collectively, the “Developers”) each own several hundred acres of land within the boundaries of Dobbin’s CCN. In 2021, the Developers filed separate petitions with the Texas Public Utility Commission (“PUC”) seeking a streamlined expedited release of their developments from Dobbin’s CCN. Dobbin intervened and alleged that it was actually providing water service even though there were no active water taps or facilities on either of the properties.

Dobbin filed suit in the United States District Court for the Western District of Texas against the PUC’s chairman and commissioners, as well as the two Developers. Dobbin sought an injunction prohibiting the PUC from considering or enforcing the decertification petitions, which were pending at the time. Dobbin also requested a declaration that the streamlined expedited release process was preempted by a federal law that grants monopoly protection to recipients of federal loans for “service provided or made available” during the term of the loan. The claims were dismissed at the district court level primarily on procedural grounds, and after the Developers’ petitions for release had been granted by the PUC, Dobbin appealed to the Fifth Circuit Court of Appeals.

In the Fifth Circuit, Dobbin asserted that the district court erred in finding that Dobbin lacked standing to seek an injunction prohibiting the PUC officials from enforcing the decertification orders. The Court of Appeals noted that sovereign immunity protects PUC officials unless an exception applies. One exception permits prospective relief if there is an ongoing violation of federal law that may be remedied by court action. Though the Court of Appeals found that Dobbin is suffering an ongoing injury caused by PUC eliminating its right to serve the Developers’ developments, enjoining PUC officials from further enforcement would not redress this injury. Since PUC had already granted the petition for release, no further enforcement action was required. The Developers sought service subsequent to the release from a municipal utility district and a municipality, respectively, which are not required to receive PUC approval before servicing the developments once they were no longer in Dobbin’s CCN. Thus, enjoining PUC would have no practical effect.

Further, without a redressable injury, Dobbin lacked standing to assert its preemption claim against PUC. Therefore, the Court did not address whether the streamlined expedited release process is preempted by the federal law granting monopoly protection to recipients of federal loans for “service provided or made available” during the term of the loan.

Litigation Cases

Dickson v. Am. Gen. Life Ins. Co., No. 22-0730, 67 Tex. Sup. Ct. J. 1617, 2024 Tex. LEXIS 785 (Sep. 6, 2024).

Justice Young’s concurrence in a recent denial of a petition for review before the Texas Supreme Court emphasizes and reiterates Texas courts’ obligation to determine subject-matter jurisdiction before turning to the merits of a case.

Anna Dickson (“Dickson”) initially sued American General Life Insurance Company (“American General”) for withholding interest due on life-insurance policies, and later amended her petition to assert claims on behalf of a putative class. American General filed a plea to the jurisdiction arguing that the court lacked subject matter jurisdiction because Dickson was requesting a declaration that the Insurance Code statute was unconstitutional but failed to join the Insurance Commissioner as a necessary and indispensable party. In response to Dickson’s class-certification motion, American General argued that, along with a lack of subject matter jurisdiction, Dickson’s equitable claims on behalf of a varied class did not satisfy Texas Rule of Civil Procedure 42’s predominance requirement, which states that for a class action to be maintained as a class action, the common questions of law or fact must predominate over any questions affecting only individual members of the class.

The trial court did not expressly rule on American General’s plea to the jurisdiction. Instead, the trial court granted Dickson’s class-certification motion, and American General appealed. On appeal, American General argued that Rule 42’s predominance requirement was not met but also continued to maintain that the trial court lacked subject-matter jurisdiction. The court of appeals found that it lacked jurisdiction to consider American General’s jurisdictional challenge. The court of appeals then turned to American General’s challenge to Dickson’s Rule 42 predominance requirement and agreed with American General, thereby reversing Dickson’s certification order.

Dickson filed a petition for review, which the Texas Supreme Court denied. Justice Young agreed that there was no substantial basis to grant review of the class-certification ruling. However, Justice Young warned that “a court must not reach the merits of a dispute when its jurisdiction is in doubt without first determining whether it has jurisdiction.” The court of appeals was wrong to disregard the jurisdictional challenge because “[c]ourts always have jurisdiction to determine their own jurisdiction.” See Houston Mun. Emps. Pension Sys. v. Ferrell, 248 S.W.3d 151, 158 (Tex. 2007) (emphasis added). And appellate courts have jurisdiction to determine their own and the lower courts’ jurisdiction. See Abbott v. Mexican Am. Legis. Caucus, 647 S.W.3d 681, 699 (Tex. 2022). Determining subject-matter jurisdiction is an obligation of the courts, who “not only may but should raise jurisdictional doubts sua sponte.” Justice Young emphasized that jurisdictional determinations are conditions precedent to reaching the merits of a legal dispute because otherwise the court’s opinion would be advisory and beyond the power granted to courts by the Texas Constitution.

Justice Young agreed that American General was correct in raising its jurisdictional challenge before the court of appeals even though the lower court had not ruled on its plea to the jurisdiction. He reiterated that “[e]very party has a duty to the court to raise any potential defects in its (or a lower court’s) subject-matter jurisdiction whenever a jurisdictional doubt arises.” Raising jurisdictional challenges “helps protect the tribunal from undertaking objectively unauthorized action” and ensures “that judges do not assume power—even inadvertently or about seemingly trivial matters—that do not belong to them.” A party raising a jurisdictional challenge is given great leeway in how that challenge is presented to the court. “No special pleading device is needed to do so, and courts should welcome rather than resist efforts to ensure that the judiciary is empowered to step into the merits.”

Justice Young noted that in this particular case, remand was not necessary because American General’s jurisdictional challenge was not persuasive and would have led to the court of appeals reaching the merits issue anyway. Going forward, courts should resolve any and all jurisdiction issues before reaching any merits issues.

In re Dall. HERO, No. 24-0678, 2024 Tex. LEXIS 786 (Sep. 11, 2024).

Ballot propositions that seek to nullify citizen-initiated ballot propositions, but do not identify the ways it seeks to nullify, will mislead and confuse voters and must therefore be removed from the ballot. A grassroots organization, Dallas HERO, sought to include three citizen-initiative propositions on the November 5, 2024 ballot. Dallas HERO’s ballot propositions sought to grant standing to any City resident and waive government immunity for claims brought pursuant to the charter amendment, require the City to conduct a survey on quality-of-life issues which would affect the City Manager’s compensation and potentially lead to their termination, and require certain revenues to be expended on police and fire issues (the “Dallas HERO Propositions”). Dallas HERO obtained the requisite signatures to qualify its propositions for places on the ballot.

Several City Council members disapproved of the Dallas HERO Propositions and, in response, moved to include three additional charter amendments on the ballot, which passed (the “Council Propositions”). The Council Propositions, among other things, sought to prevent the charter from granting residents standing to sue the City or waive the City’s immunity and to allow its propositions to have primacy in the case of conflicts within the charter. Dallas HERO then sought mandamus relief against the City and several officials arguing, among other things, that the Council members’ propositions were misleading under the Dacus standard. See Dacus v. Parker, 466 S.W.3d 820 (Tex. 2015). Dallas HERO specifically argued that under Dacus, the Council’s ballot language omitted “certain chief features that reflect its character and purpose.” Dacus, 466 S.W. 3d at 826.

The Fifth Court of Appeals denied mandamus relief, but the Texas Supreme Court conditionally granted in part. The Texas Supreme Court found that “the text of each challenged [Council Proposition] demonstrates that its purpose is to nullify a citizen-initiated proposition.” Providing both sets of propositions on the ballot creates a dilemma in two ways. First, the ballot language did not acknowledge the conflicting character of the propositions so voters could attempt to avoid the dilemma of casting consistent votes. Second, the ballot language failed to inform voters of the conflict provisions that would resolve dilemmas in favor of the Council Propositions, not the Dallas HERO Propositions. Based on these omissions, the Council Propositions fail the Dacus standard.

The Court did not fully prohibit any ballot propositions that seek to nullify citizen-initiative propositions. Instead, it found that the Council Propositions failed to meet the Dacus standard because the ballot language did not identify the ways in which the Council Propositions sought to nullify the Dallas HERO Propositions. Without the ballot language’s guidance, voters would not be able to understand how the propositions contradicted one another and therefore could not vote consistently.

Given the Council Propositions’ failure to meet the Dacus standard, Dallas HERO argued that Council Propositions must be removed from the ballot, while the City argued that the Court could only correct the propositions to not be misleading. The Court determined that the proper remedy was to remove the Council’s Propositions from the November ballot in order to not interfere with or delay the upcoming election. The Court noted that the Council Propositions were the converse of the Dallas HERO Propositions, therefore removal was the only way to avoid confusing voters.

In a footnote, the Court isolated its holding to scenarios when two conflicting propositions are on the same ballot, and it did not hold “that the ballot description for any charter amendment that clarifies or contradicts other existing or proposed parts of the city charter must flag that inconsistency to comply with Dacus.”

Air and Waste Cases

Waste Management Hi-Acres Landfill in New York Wins “Green Amendment” Suit.

In 2022, a private environmental group filed suit against the State of New York, New York State Department of Environmental Conservation (“DEC”), the city of New York as a customer of the landfill, and owner of the Hi-Acres Landfill, a private entity, under the state’s Green Amendment to its constitution which grants citizens of New York a constitutional right to clean air, water, and a healthful environment. The environmental group asked the court to either require the owner to close the landfill or reduce its emissions. The district court judge dismissed the claims against the owner, finding that the Green Amendment could not be used to sue a private party, and against the city, finding that its status as a customer was not a violation of the Green Amendment. The court, however, denied the motion to dismiss claims against the state and DEC due to their obligation to protect citizens of the state. Upon appeal, the court reversed the finding in part and dismissed the claims against the state and DEC, ruling that the Green Amendment does not permit citizens to demand specific enforcement actions from state agencies. Fresh Air for the Eastside, Inc. v. State of New York, 229 A.D.3d 1217 (N.Y. App. Div. 2024).

Court Rejects Challenges to Nuclear Waste Storage Site.

On August 27, 2024, a D.C. Circuit panel of three judges upheld federal approval for a privately-owned temporary nuclear waste storage site in New Mexico, stating that Nuclear Regulatory Commission (“NRC”) regulations allow licenses to have forward looking conditional terms. The license, issued last year, allows the license holder, a private entity, to temporarily store spent nuclear waste until Congress passes a law to allow the federal government to take ownership of and permanently store the waste. An anti-nuclear group argued that the Nuclear Waste Policy Act prohibits the Department of Energy from taking ownership of spent fuel from private reactors until a permanent repository is established. In March 2024, the Fifth Circuit invalidated the license, claiming the Atomic Energy Act does not authorize NRC to approve temporary storage sites. The D.C. Circuit, however, upheld NRC’s authority to regulate and license spent nuclear fuel storage. Anti-nuclear groups continue to contend that the ruling undermines congressional safeguards designed to ensure radioactive waste is ultimately stored in deep geologic repositories rather than remaining in above-ground facilities. Beyond Nuclear Inc. v. United States NRC, 113 F.4th 956 (5th Cir. 2024).

“In the Courts” is prepared by Samantha Tweet in the Firm’s Districts Practice Group; Sydney Sadler in the Firm’s Litigation Practice Group; and Mattie Neira in the Firm’s Air and Waste Practice Group. If you would like additional information or have questions related to these cases or other matters, please contact Samantha at 512.322.5894 or stweet@lglawfirm.com, or Sydney at 512.322.5856 or ssadler@lglawfirm.com, or Mattie at 512.322.5804 or mneira@lglawfirm.com.